The Australian Dollar (AUD) is trading near its recent two-month low, consolidating as investors balance domestic and global factors ahead of Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Symposium. 

Market participants are closely monitoring macroeconomic signals, central bank policy expectations, and technical indicators as the AUD/USD pair holds just above critical support levels. ProDivia Group broker Mark Wolf outlines the key elements of the subject in his article.

Australian Dollar Nears Two-Month Low

The AUD/USD pair has been under sustained pressure, slipping to 0.6414, its lowest level in two months, recorded on Thursday. The pair remains fragile after registering four consecutive daily losses earlier in the week. At the time of writing, it trades near 0.6420, with market sentiment skewed toward downside risks.

The weakness in the Australian Dollar comes as the US Dollar (USD) steadied following a round of stronger-than-expected S&P Global US PMI data. The upbeat results provided a lift to the greenback, overshadowing Australia’s own stronger PMI figures and consumer confidence gains.

US PMI Data Supports Dollar Strength

The US Composite PMI for August rose to 55.4 from 55.1, while the Manufacturing PMI surged to 53.3 from 49.8, easily beating market expectations of 49.5. Although the Services PMI edged lower to 55.4 from 55.7, it still outperformed consensus forecasts of 54.2, reflecting a resilient US services sector.

The PMI results reinforce the perception of US economic resilience, offering the Federal Reserve greater flexibility in policy maneuvering. This backdrop strengthened the US Dollar Index (DXY), which is holding near 98.60, reflecting broad USD demand against major peers.

Market Expectations on Fed Policy

Investors now turn to Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium for further clarity on policy direction. The Fed faces the delicate challenge of weighing persistent inflationary pressures against evidence of labor market softening.

Last week’s Initial Jobless Claims rose to 235K, an eight-week high and above the expected 225K, highlighting cracks in employment conditions. Still, markets have reduced their expectations for a near-term aggressive cut. According to the CME FedWatch Tool, the probability of a September rate cut stands at 74%, down from 82% on Wednesday.

The FOMC Minutes from the July 29–30 meeting revealed that most policymakers viewed inflation risks as outweighing labor market concerns. The Fed held its benchmark interest rate steady at 4.25%–4.50%, emphasizing patience amid heightened economic uncertainties and tariff-related policy divisions.

Reserve Bank of Australia Outlook

On the domestic front, the Reserve Bank of Australia (RBA) delivered a 25 basis-point rate cut earlier this week, lowering the Official Cash Rate (OCR) to 3.6% from 3.85%. The move, widely anticipated, reflects the RBA’s cautious approach to balancing inflation moderation with supporting growth.

Some analysts expect that the RBA may consider a larger 50 bps cut in November, particularly if consumer spending and investment momentum falter. Consumer Inflation Expectations in August slowed to 3.9%, down from July’s 4.7%, easing immediate inflation concerns.

Meanwhile, Australia’s S&P Global Manufacturing PMI climbed to 52.9 from 51.3, while Services PMI rose to 55.1 from 54.1. The Composite PMI improved to 54.9 from 53.8, pointing to broad economic expansion. Additionally, Westpac Consumer Confidence surged 5.7% to 98.5, its highest level since February 2022.

Technical Analysis: AUD/USD Outlook

From a technical standpoint, the AUD/USD pair remains constrained below its short-term moving averages. On the daily chart, the price is trading under the nine-day Exponential Moving Average (EMA) at 0.6461 and also below the 50-day EMA at 0.6488, underscoring bearish momentum.

The 14-day Relative Strength Index (RSI) is lodged below the neutral 50 mark, reflecting a bearish bias in momentum.

• Downside Targets: The immediate support lies at the recent two-month low of 0.6414. A decisive break below this level could expose the three-month low at 0.6372.
  
• Upside Targets: On the flip side, reclaiming the nine-day EMA at 0.6461 would be the first sign of recovery. Sustained gains above 0.6488 could open the way to the monthly high of 0.6568 (August 14) and potentially the nine-month high of 0.6625 (July 24).

Conclusion

The Australian Dollar is trading sideways near its two-month low as the US Dollar steadies on stronger US PMI data and cautious Fed policy expectations. With the CME FedWatch Tool showing slightly reduced odds of a September rate cut, markets now await Jerome Powell’s Jackson Hole speech for further policy cues.

Domestically, stronger Australian PMI data and a rebound in consumer confidence provide some cushion for the AUD, though the RBA’s cautious stance and potential for further cuts keep downside risks alive. Technical indicators highlight a bearish tilt for AUD/USD, with traders eyeing the 0.6414 support closely.